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Chapter 8, Problem 6DQ
Summary Introduction

To identify: The Company’s total return and dividend.

Beta coefficient:

Beta coefficient measures the sensitivity of the stock in comparison with the market. It is a historical measure. It means it only takes past information into account.

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An insurance company has liabilities of £7 million due in 10 years' time and £9 million due in 17 years' time. The assets of the company consist of two zero-coupon bonds, one paying £X million in 7 years' time and the other paying £Y million in 20 years' time. The current interest rate is 6% per annum effective. Find the nominal value of X (i.e. the amount, IN MILLIONS, that bond X pays in 7 year's time) such that the first two conditions for Redington's theory of immunisation are satisfied. Express your answer to THREE DECIMAL PLACES.
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Chapter 8 Solutions

Bundle: Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition 6-Month Printed Access Card), 8th + Aplia Printed Access Card

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